CYPRUS: Orphanides says ECB should start buying sovereign bonds

The former Governor of the Central Bank of Cyprus Athanasios Orphanides believes that the European Central Bank (ECB) "should have already started" buying sovereign bonds, or full-blown quantitative easing (QE).

“Now that the stress tests are out of the way, it would be quite positive for the Euro area if they (ECB) announce that move as soon as possible”, Orphanides told CNBC on Wednesday.

“It`s not clear to me why going forward, with the announcement of the stress tests, the Governing Council of the ECB would not now take the necessary action to increase the size of its balance sheet, which I believe will necessarily include purchases of government debt”, he added.

Orphanides said that such a move was necessary and it should be implemented now in order for the euro zone to avoid a return to recession, and warned that “inaction can be incredibly costly”.

“We may have a triple dip in the euro area – and we`re barely out of the second dip”, he said. “If the ECB were to act very quickly in order to meet its price stability mandate, I think that would provide sufficient accommodation so that even if we have continued declines for the next few months, they would be quickly reversed”, he concluded.